According to data released on Wednesday, Mexico has overtaken China to become the largest exporter of goods to the United States in 2023.
The Bureau of Economic Analysis, a U.S. government agency, reported that the U.S. imported a total of $427.2 billion worth of goods from China last year, representing a decrease of approximately 20% compared to the previous year. Meanwhile, Mexico saw an increase in exports to the U.S., totaling $475.6 billion, marking a 5% rise from 2022.
This shift marks the first time in two decades that Mexico has emerged as the leading source of imported goods for the United States.
The trend towards diversifying supply chains has been accelerated by concerns over the uncertain relationship between the U.S. and China. The Biden administration has actively supported this diversification effort, labeling it as “friendshoring” to mitigate geopolitical risks. Friendshoring involves establishing supply chains among countries with similar values while reducing dependence on geopolitical adversaries.
As U.S.-China relations have become increasingly competitive, particularly in the technology sector, national security concerns have been brought to the forefront.
Southeast Asia has emerged as a prime destination for supply chain diversification due to its relative stability and proximity to China, a major manufacturing center. President Joe Biden identified Vietnam as a promising partner for developing a semiconductor supply chain during a speech in September. Additionally, Singapore and Malaysia have attracted attention from American companies seeking to diversify their supply chains.
Chinese companies have also taken steps to diversify their supply chains in order to mitigate geopolitical risks. Many manufacturers have expanded operations to other countries, including those in Southeast Asia, Africa, and even within the United States, as previously reported by Nikkei.
Despite the increase in trade with Mexico, the U.S. trade deficit with the country widened by 17% to $152.4 billion in 2023. Conversely, the trade deficit with China narrowed by 27% to $279.4 billion, reaching its lowest level since 2010, according to data from the U.S. Commerce Department.
Overall, the U.S. trade deficit for 2023 decreased to $773.4 billion, marking an 18.7% improvement from $951.2 billion in the previous year. While imports have declined, U.S. exports to other countries have increased, despite the strength of the dollar and a cooling global economy.
Despite ongoing efforts to diversify supply chains, both Washington and Beijing have been engaged in attempts to stabilize their relationship. Senior officials from the two countries met in Beijing on Monday and Tuesday to address trade concerns and other economic issues, marking several high-level meetings since last September.
